The role of corporate governance in a transitional economy

Abstract

Vietnam started significant transition policy since 1986 with the introduction of extensive policy of Doi Moi process. The transition from a centrally planned economy toward market-oriented economy has brought some significant results; however Vietnam has until recently stood out as a success story among the transitional economies from a developmental perspective. This requires further investigation of other factors relating to the viability assumption of neoclassical economics. This paper aims to investigate the relationship between corporate governance and firm value in Vietnam, a small and open neo-transitional economy. The result suggests a positive relationship of board size and the value of a firm, but it is not significant. The result also shows a lack of significant negative relationship of other two independent corporate governance variables (shareholder concentration and CEO duality) and the value of a firm. However, to some extent, too high shareholder concentration and CEO duality tend to have negative impacts to the firm value. Other control variables such as price-to-book value ratio and return on total assets have significant and positive impacts on the value of a firm, while the market capitalization has a negative relationship with the value of a firm.